ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Wednesday, August 16, 2017

Duress in Demotion and Termination Case: Not so Fast, Employers

In times when it seems that employers often not only attempt to, but also often get away with, unreasonable demotion and/or termination attempts, the Eighth Circuit Court of Appeals has upheld the rights of employees not to be forced into unreasonable demotion “agreements.”

The crucial facts of the case are as follows: In 2011, Timothy Gilkerson was hired by Nebraska Colocation Centers (“NCC”) as a Vice President and General Manager in an IT function that also included Gilkerson’s expanding the company’s customer base. Among other things, the employment contract stated that Mr. Gilkerson could only be fired for cause defined as the “willful misconduct in carrying out Executive’s duties which causes economic harm” to NCC or the “persistent failure to perform the duties and responsibilities of his employment hereunder….” The contract also specified various generous sales and retirement bonuses.

NCC subsequently became dissatisfied with Gilkerson’s sales-related performance. Gilkerson received an employee performance review with an “Unsatisfactory” rating for “Achieved Sales Goals” and “Fulfills the terms of his contract.” Gilkerson signed the review document, but noted his dissatisfaction with the sales goal rating. NCC ultimately determined that Gilkerson was not “effective” in his role, announced the hiring of a new Vice President and, the same day, told Gilkerson that 1) the new employee would be moving into Gilkerson’s office and 2) that Gilkerson’s job ti Unknown
tle was changed to something less desirable from his point of view.

Crucially to the case, Gilkerson was presented with a “Mutual Rescission” to rescind the employment contract and a “Term Sheet” which set forth new and much less desirable terms of Gilkerson’s employment. In other words” NCC sought to demote Gilkerson. Importantly, the “mutual rescission” sought to convert Gilkerson’s contractual status to be an at-will employee. Gilkerson smartly consulted with an attorney who told him not to sign the Mutual Rescission. At a subsequent meeting with the NCC president, Gilkerson was told he had two choices: Accept the rescission and term sheet or be fired for cause; an obvious Hobson’s choice. Gilkerson signed. You guessed it: he was then also fired.

Gilkerson filed suit, claiming contractual duress which, in Nebraska, involves a two-part test: First, the agreement obtained must have been obtained by means of pressure. Second, the agreement itself must be unjust, unconscionable, or illegal. Whether particular facts are sufficient to constitute duress is, in Nebraska, a matter of law.

The duress test sounds like a high standard to meet. Sure enough: on a motion for summary judgment, the trial court found that “had the revised terms … been given to a newly-hired employee, they would certainly have been seen as fair, or even generous.” However, as the Court of Appeals pointed out: Gilkerson was not a new employee. It was just wrong for the employer and court to treat him as such. The Court found the new “term sheet” unjust because, after analyzing case precedent, there was no economic justification for requiring Gilkerson to accept an at-will employment agreement, other than “it allowed NCC to avoid the provisions of the Contract that were most favorable to Gilkerson.” No kidding. The court also specifically took issue with the provision that made Gilkerson an at-will employee after having served in a contractually better position for quite some time. The appellate court thus found duress to lie. Images

Contracts are, of course, negotiable at the outset. However, in times of fierce competition in many job markets, it is good to see that courts standing up for employees presented with clearly unreasonable employment “choices” and decisions by employers well into an employment situation. It is one thing if an employee is at working will. It is quite another if he/she is not, as this case clearly demonstrates. Contracts must be performed in good faith by both parties. That, of course, includes the employer as well. In times when unemployment rates are dropping, hopefully employees will obtain stronger bargaining positions both at the outset of and during the employment relationship. Nonetheless, presenting employees with unreasonable “choices” such as the above. Of course, employees should rise to the reasonable expectations of employers. But employers do not and should not have carte blanche to do whatever they wish to contractually bound employees. This can hardly come as a surprise to any reasonable employer.

The case is Gilkerson v. Nebraska Colocation Centers LLC., 2017 WL 2656073.

August 16, 2017 in Labor Contracts, True Contracts | Permalink | Comments (0)

Saturday, August 12, 2017

Why Hawkins v. McGee Might be the Best Teaching Tool in Contracts Law

Continuing with responses to Professor Calleros' call for the best contracts cases, Professor Otto Stockmeyer weighs in with his piece 'Reflection on Teaching the First Day of Contracts Class.' In his paper Professor Stockmeyer discuses advice for first year law students and the significance of the Contracts course. He then goes on to assert the 'Hairy Hand' Case, Hawkins v. McGee, is the most significant case and an excellent starting place for law students. 

 

The full paper can be found by following the link below. 

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2927249

August 12, 2017 | Permalink

Thursday, August 10, 2017

Why R.R. V. M.H. Might Be the Best Teaching Tool in the Contracts Casebook

Recently, Professor Charles Calleros posted a blog proclaiming Pyeatte v. Pyeatte as the "best teaching tool in contracts law." In his post Professor Calleros issued an open call to colleagues to respond with their interpretations on the best cases for contract law.  David Epstein has answered the call with his choice of RR v. MH, a Massachusetts Supreme Court decision. The case focuses on the concept of surrogate parents and whether their contract would be enforceable. The full piece is found below at the link, and is a promising read for educators and students alike. 

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3015923 

Full paper found at the link above. 

August 10, 2017 | Permalink

Contracts and Commercial Law Scholarship: Weekly Top Ten SSRN Downloads (August 10, 2017)

Top-10 Cube Letters

Top Downloads For: SSRN Logo2

Contracts & Commercial Law eJournal

Recent Top Papers (60 days)

As of: 11 Jun 2017 - 10 Aug 2017

Rank Paper Downloads
1.

How to Restructure Venezuelan Debt (¿Cómo restructurar la deuda venezolana?)

Cleary Gottlieb Steen & Hamilton LLP - New York Office and Duke University School of Law
2,216
2.

Crypto Transaction Dispute Resolution

University of St. Thomas, Minnesota - School of Law and Department of Mathematics, Metropolitan State University
248
3.

The Choice Theory of Contracts (Introduction)

Tel Aviv University - Buchmann Faculty of Law and Columbia University - Columbia Law School
140
4.

Justice, Fault, and Efficiency in Contract Law

University of Florida - Levin College of Law
90
5.

Over-Reliance Under Contractual Disgorgement

Hebrew University of Jerusalem - Faculty of Law and Hebrew University of Jerusalem
86
6.

Aspects of Loyalty

McGill University, Faculty of Law, Paul-André Crépeau Centre for Private and Comparative Law
85
7.

Relational Contracts of Adhesion

University of Pennsylvania Law School
83
8.

Corporate Governance for Complex Cryptocurrencies? A Framework for Stability and Decision Making in Blockchain-Based Monetary Systems

European University Institute
79
9.

Disclosure Rules in Contract Law

Harvard Law School and Tel Aviv University
76
10.

Postscript to Just Relationships: Reply to Gardner, West, and Zipursky

Tel Aviv University - Buchmann Faculty of Law and Tel Aviv University - Buchmann Faculty of Law
75

 

Top Downloads For: SSRN Logo2

Law & Society: Private Law - Contracts eJournal

Recent Top Papers (60 days)

As of: 11 Jun 2017 - 10 Aug 2017

Rank Paper Downloads
1.

Crypto Transaction Dispute Resolution

University of St. Thomas, Minnesota - School of Law and Department of Mathematics, Metropolitan State University
248
2.

The Choice Theory of Contracts (Introduction)

Tel Aviv University - Buchmann Faculty of Law and Columbia University - Columbia Law School
140
3.

Property and Sovereignty Imbricated: Why Religion Is Not an Excuse to Discriminate in Public Accommodations

Harvard Law School
98
4.

Over-Reliance Under Contractual Disgorgement

Hebrew University of Jerusalem - Faculty of Law and Hebrew University of Jerusalem
86
5.

Relational Contracts of Adhesion

University of Pennsylvania Law School
83
6.

Disclosure Rules in Contract Law

Harvard Law School and Tel Aviv University
76
7.

Springwell-watch: New Insights into the Nature of Contractual Estoppel

London School of Economics - Law Department
74
8.

Property and the Construction of the Information Economy: A Neo-Polanyian Ontology

Georgetown University Law Center
58
9.

Digital Technology as a Challenge to European Contract Law – From the Existing to the Future Architecture

Humboldt University of Berlin - Faculty of Law and European University Institute
58
10.

Liberal Contract Theory and Actually Existing Contracts

New York University (NYU) - Furman Center for Real Estate and Urban Policy
51

August 10, 2017 in Recent Scholarship | Permalink | Comments (0)

Thursday, August 3, 2017

More Real Estate Misrepresentations

I'm just going to start a little subset of cases involving misrepresentations in the context of real estate transactions. This latest case is out of Tennessee, Hall v. Eagle Rock Development, LLC, No. E2015-01487-COA-R3-CV (you can listen to the oral arguments here). In this case, the Halls won rescission of the purchase contract and a refund of the money they paid, based on misrepresentations regarding the lot's access to public sewage disposal. While there was a dispute as to whether they were specifically told by the development's broker that the lot had access to public sewage, the court found the broker had not been "forthcoming" about the sewage situation, and the other documents involved in the transactions represented at several points that public sewage access would be possible, including the MLS brief and the real estate listings that contained public sewage as a product feature. The website for the development stated that the lots would have public sewage access, and nowhere qualified the statement as being contingent on certain funding requirements. Plus, there was a sewer manhole directly in front of the lot. 

The first time the Halls were provided with a disclosure statement indicating they would not have public sewage access was actually the day the sales contract was executed, despite the fact that the sellers had prepared this document months earlier and so could have shared it well in advance. The fact that the Halls signed the disclosure statement while executing the sales contract did not bar their recovery. (Nor did the fact that the Halls' contract stated that they were purchasing the property "as is.")

The Halls maintained that they would never have bought the lot had they known it didn't have public sewage access, not least because it restricted the size of the house they could build on the lot. Accordingly, the court ordered the contract rescinded and the purchase price be refunded, which was exactly the remedy that the Halls were seeking. 

The sellers pointed out that it actually took the Halls three years to figure out public sewage access was not possible. They claimed that the problem here was the Halls' failure to fully investigate the property or fully read the documents they signed at closing. However, the court found that the weight of all the contrary representations the Halls had been given outweighed this. 

August 3, 2017 in Recent Cases, True Contracts | Permalink | Comments (0)

Contracts and Commercial Law Scholarship: Weekly Top Ten SSRN Downloads (August 3, 2017)

Top-10-gold-logo

Top Downloads For: SSRN Logo2

Contracts & Commercial Law eJournal

Recent Top Papers (60 days)

As of: 04 Jun 2017 - 03 Aug 2017

Rank Paper Downloads
1.

Crypto Transaction Dispute Resolution

University of St. Thomas, Minnesota - School of Law and Department of Mathematics, Metropolitan State University
235
2.

A New Dawn for the Law of Illegality

University of Oxford - Faculty of Law
142
3.

The Choice Theory of Contracts (Introduction)

Tel Aviv University - Buchmann Faculty of Law and Columbia University - Columbia Law School
138
4.

The Design of Staged Contracting

University of Virginia School of Law and Stanford Law School
120
5.

Justice, Fault, and Efficiency in Contract Law

University of Florida - Levin College of Law
87
6.

Over-Reliance Under Contractual Disgorgement

Hebrew University of Jerusalem - Faculty of Law and Hebrew University of Jerusalem
83
7.

Springwell-watch: New Insights into the Nature of Contractual Estoppel

London School of Economics - Law Department
73
8.

Corporate Governance for Complex Cryptocurrencies? A Framework for Stability and Decision Making in Blockchain-Based Monetary Systems

European University Institute
73
9.

Postscript to Just Relationships: Reply to Gardner, West, and Zipursky

Tel Aviv University - Buchmann Faculty of Law and Tel Aviv University - Buchmann Faculty of Law
73
10.

Disclosure Rules in Contract Law

Harvard Law School and Tel Aviv University
72

 

Top Downloads For: SSRN Logo2

Law & Society: Private Law - Contracts eJournal

Recent Top Papers (60 days)

As of: 04 Jun 2017 - 03 Aug 2017

Rank Paper Downloads
1.

Crypto Transaction Dispute Resolution

University of St. Thomas, Minnesota - School of Law and Department of Mathematics, Metropolitan State University
235
2.

The Choice Theory of Contracts (Introduction)

Tel Aviv University - Buchmann Faculty of Law and Columbia University - Columbia Law School
138
3.

The Design of Staged Contracting

University of Virginia School of Law and Stanford Law School
120
4.

Property and Sovereignty Imbricated: Why Religion Is Not an Excuse to Discriminate in Public Accommodations

Harvard Law School
96
5.

Over-Reliance Under Contractual Disgorgement

Hebrew University of Jerusalem - Faculty of Law and Hebrew University of Jerusalem
83
6.

Springwell-watch: New Insights into the Nature of Contractual Estoppel

London School of Economics - Law Department
73
7.

Disclosure Rules in Contract Law

Harvard Law School and Tel Aviv University
72
8.

Property and the Construction of the Information Economy: A Neo-Polanyian Ontology

Georgetown University Law Center
54
9.

Liberal Contract Theory and Actually Existing Contracts

New York University (NYU) - Furman Center for Real Estate and Urban Policy
49
10.

Leadership Competencies for Business Lawyers: Using a Framework that Links Strategy, Law, and Ethics

University of Michigan
46

August 3, 2017 in Recent Scholarship | Permalink | Comments (0)

Tuesday, August 1, 2017

Fact-Checking the Snopes Lawsuit

You, like me, might often resort to Snopes to weed through what's true and what's not in the avalanche of information we're exposed to every day. (My most recent Snopes search: can a gift shop upcharge federal postage stamps? The answer is yes!) Recently Snopes turned to its constituents on the Internet to help provide funding to keep the website alive, precipitated by a lawsuit stemming from several contracts between the parties at issue. The whole thing is a matter of messy corporate structure that really seems like it's going to depend on the court's reading of the stock purchase agreement between the parties. Vox has a rundown of the whole situation here (that I'm quoted in). 

August 1, 2017 in Commentary, Current Affairs, In the News, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)

Friday, July 28, 2017

Why Pyeatte v. Pyeatte May Be the Best Teaching Tool in Contracts Law

Our friend and esteemed colleague, Professor Charles Calleros, has kindly sent the following as a guest contribution to the ContractsProf Blog.  Enjoy!

Recently Val Ricks has collected a number of essays from colleagues on best and worst cases for the development or application of contract law.  In addition to participating in that project, Charles Calleros invites faculty to upload and post links to essays about their favorite cases as teaching tools (regardless whether the cases advance the law in an important way). He starts the ball rolling with this Introduction to his essay on "Why Pyeatte v. Pyeatte Might be the Best Teaching Tool in the Contracts Casebook":

Pyeatte v. Pyeatte, a 1983 decision of the Arizona Court of Appeals, did not break new ground in the field of contracts. Nonetheless, I assert that it is one of the best pedagogic tools in the Contracts casebook, for several reasons:

  •  *          The facts are sure to grab the attention of first-semester law students: A law grad reneges on a promise to support his ex-wife through graduate school after she supported him through law school during their marriage;

*          This 1980’s opinion is written in modern plain English, allowing students to focus on substance, while also learning a few necessary legal terms of art.

*          After their immersion in a cold and rather unforgiving bath of consideration and mutual assent, students can finally warm up to a tool for addressing injustice: quasi-contract;

*          The opinion’s presentation of background information on quasi-contract provides an opportunity to discuss the difference between an express contract, an implied-in-fact contract, and an implied-in-law contract; 

*          Although the wife’s act of supporting her husband through law school seems to beg for reciprocation or restitution, students must confront judicial reticence to render an accounting for benefits conferred between partners in a marriage, exposing students to overlap between contract law and domestic relations law;

*          The appellate ruling of indefiniteness of the husband’s promise – presented in a later chapter in my casebook, but looming vaguely in the background of the discussion of quasi-contract – invites critique and perhaps even speculation that the appellate panel felt comfortable denying enforcement of the promise precisely because it knew it could grant restitution under quasi-contract; and

*          The court’s admonition that expectation interest forms a ceiling for the calculation of restitution reveals a fascinating conundrum that brings us back to the court’s ruling on indefiniteness. . . .

You can find the whole essay here.

July 28, 2017 in Commentary, Contract Profs, Famous Cases, Law Schools, Miscellaneous, Recent Scholarship, Teaching, True Contracts | Permalink | Comments (2)

Thursday, July 27, 2017

Contracts and Commercial Law Scholarship: Weekly Top Ten SSRN Downloads (July 27, 2017)

Top-10 Block Letters

Top Downloads For: SSRN Logo2

Contracts & Commercial Law eJournal

Recent Top Papers (60 days)

As of: 28 May 2017 - 27 Jul 2017

Rank Paper Downloads
1.

Crypto Transaction Dispute Resolution

University of St. Thomas, Minnesota - School of Law and Department of Mathematics, Metropolitan State University
173
2.

A New Dawn for the Law of Illegality

University of Oxford - Faculty of Law
136
3.

The Choice Theory of Contracts (Introduction)

Tel Aviv University - Buchmann Faculty of Law and Columbia University - Columbia Law School
127
4.

The Design of Staged Contracting

University of Virginia School of Law and Stanford Law School
115
5.

Paternalism and Contract Law

University of Hull
105
6.

Justice, Fault, and Efficiency in Contract Law

University of Florida - Levin College of Law
84
7.

Over-Reliance Under Contractual Disgorgement

Hebrew University of Jerusalem - Faculty of Law and Hebrew University of Jerusalem
81
8.

The Failures of State Insurance Regulation

University of Minnesota Law School
79
9.

Postscript to Just Relationships: Reply to Gardner, West, and Zipursky

Tel Aviv University - Buchmann Faculty of Law and Tel Aviv University - Buchmann Faculty of Law
73
10.

Springwell-watch: New Insights into the Nature of Contractual Estoppel

London School of Economics - Law Department
71

 

Top Downloads For: SSRN Logo2

Law & Society: Private Law - Contracts eJournal

Recent Top Papers (60 days)

As of: 28 May 2017 - 27 Jul 2017

Rank Paper Downloads
1.

Crypto Transaction Dispute Resolution

University of St. Thomas, Minnesota - School of Law and Department of Mathematics, Metropolitan State University
173
2.

The Choice Theory of Contracts (Introduction)

Tel Aviv University - Buchmann Faculty of Law and Columbia University - Columbia Law School
127
3.

The Design of Staged Contracting

University of Virginia School of Law and Stanford Law School
115
4.

Paternalism and Contract Law

University of Hull
105
5.

Property and Sovereignty Imbricated: Why Religion Is Not an Excuse to Discriminate in Public Accommodations

Harvard Law School
95
6.

Over-Reliance Under Contractual Disgorgement

Hebrew University of Jerusalem - Faculty of Law and Hebrew University of Jerusalem
81
7.

Springwell-watch: New Insights into the Nature of Contractual Estoppel

London School of Economics - Law Department
71
8.

Disclosure Rules in Contract Law

Harvard Law School and Tel Aviv University
67
9.

Property and the Construction of the Information Economy: A Neo-Polanyian Ontology

Georgetown University Law Center
51
10.

Liberal Contract Theory and Actually Existing Contracts

New York University (NYU) - Furman Center for Real Estate and Urban Policy
47

July 27, 2017 in Recent Scholarship | Permalink | Comments (0)

Make Sure You Use Photos According to the License Agreement

Recently, Procter & Gamble has been sued for copyright infringement based on its use of photographs on packaging. It's not that P&G didn't have a license; it's that P&G allegedly violated the scope of the license. The allegations claim that P&G, trying to keep costs down, negotiated for fairly narrow rights. It makes a ton of sense to do that if that's all you want the photos for. After all, why pay for rights that you're probably not going to utilize? However, the caveat with that is to be sure that you won't want to use the photos beyond what you're negotiating. That's allegedly what P&G did, and why it finds itself the subject of a lawsuit. 

July 27, 2017 in Commentary, Current Affairs, In the News, Recent Cases, True Contracts | Permalink | Comments (0)

Wednesday, July 26, 2017

Court Refuses to Send Claims Against DirecTV to Arbitration

This recent case out of the Central District of California, Perez v. DirecTV Group Holdings, LLC, Case No. 8:16-cv-1440-JLS-DFMx, has some interesting allegations. The plaintiff claims that DirecTV contacted her, unsolicited, at her place of business and sold her a promotional deal there for satellite cable. After the plaintiff agreed to the deal, DirecTV installed the equipment that same day and then asked the plaintiff to sign an Equipment Lease Agreement (ELA). The ELA was entirely in English, even though all communications up to that point had taken place in Spanish (and even though DirecTV apparently had a Spanish-language version of the ELA). The plaintiff signed the ELA, even though she couldn't understand it and it wasn't translated for her, and gave it to the DirecTV representative. She was not given a copy to keep for herself. 

Later, after selling her the satellite cable, DirecTV then contacted the plaintiff to say that she didn't have permission to display the cable, since she was displaying it in a business. It demanded settlement of the purported illegal reception and display. The reception and display DirecTV complained about was the same equipment that DirecTV had just installed. DirecTV demanded $5,000 from the plaintiff to settle the claim. The plaintiff brought this class action, alleging that this was part of a scheme DirecTV had to target selling its services to small business owners (especially minority business owners) and then immediately turn around and accuse those small business owners of having purchased the wrong type of DirecTV for their businesses.  

DirecTV moved to compel arbitration.  The ELA did have an arbitration provision, and the plaintiff did sign it. However, the ELA referenced the Customer Agreement, which she did not receive until it was sent to her by mail later, and therefore the ELA's terms were actually ambiguous, meaning there was no clear agreement to arbitrate.  

DirecTV therefore argued that the plaintiff consented to arbitration when she received the Customer Agreement in the mail, with its full and thorough arbitration provision, and didn't cancel DirecTV's service. However, silence alone does not ordinarily represent acceptance. And the offer and acceptance on the contract between the plaintiff and DirecTV had already happened, on the day of installation. There was nothing in the ELA that indicated that the terms of the contract would change in the future when she received the Customer Agreement and that by keeping the Customer Agreement she was consenting to those changes. 

Other courts have enforced DirecTV's arbitration provision but those cases were distinguishable because those customers were given the Customer Agreement before installation. In at least one other case, a court enforced the Customer Agreement when it was provided after installation because of "practical business realities." This court, however, expressed skepticism that "business practicalities" were a valid justification, and, at any rate, there was no such business practicality at issue here. DirecTV could easily have provided the plaintiff with the Customer Agreement when service was installed. 

At any rate, even if the arbitration provision were enforceable, it excepted any dispute regarding "theft of service," which the case at issue concerns. DirecTV alleged that it was not required to arbitrate these disputes, but its customers were. This one-sided interpretation of this provision raised issues of unconscionability, especially paired with the plaintiff's powerlessness to negotiate the contract at all, which was not in a language she spoke, and which she did not receive until after she was in a position where to refuse the terms would have resulted in a contractual penalty of a cancellation fee of several hundred dollars. Therefore, the court refused to compel arbitration. 

July 26, 2017 in Recent Cases, Television, True Contracts | Permalink | Comments (0)

Tuesday, July 25, 2017

Differences Between German and American Law Don't Preclude German Forum

I started reading this case out of the Northern District of Alabama, ProctorU, Inc. v. TM3 Software GMBH, Civil Action Number 2:17-cv-00926-AKK (behind paywall), because it involves exam proctoring software, which of course is a type of software I am interested in. It ends up really being a case about forum selection and German law vs. American law. 

ProctorU alleged that TM3 was contractually obligated to provide software that could "accurately identify test-takers" within 140 characters. Instead, TM3 provided software that ProctorU claimed could not accurately identify test-takers, even after 280 characters. (I'm not sure how this works technologically; the opinion doesn't get into it beyond this, although I found the website for the software here.) ProctorU therefore sued in the Northern District of Alabama. TM3 moved to dismiss based on a forum selection clause in their contract that required cases to be brought in Germany. 

ProctorU tried to argue that the forum selection clause was unenforceable because of the differences between German and American law. For instance, a jury trial wouldn't be available to ProctorU, it wouldn't be able to recover punitive damages, and discovery would be much more limited than American discovery. The court, however, found that nothing about those differences indicated that ProctorU would be unable to prove its case in Germany. 

ProctorU also tried to argue that it had agreed to the forum selection clause based on misrepresentations by TM3, and that, having been induced by fraud, it should therefore be unenforceable. ProctorU alleged that TM3 told ProctorU its investor was the state of Bavaria, who would not agree to any forum selection clause that was not German. It turned out that Bavaria had only an indirect minority interest in TM3. ProctorU claimed had it known how minor the state of Bavaria's interest was, it would not have agreed to the German provision. However, the court found that the statement that the state of Bavaria was an investor was true; TM3 had not told ProctorU that the state of Bavaria was a majority investor. Furthermore, it was ProctorU's obligation to conduct due diligence before accepting the contract terms, which should have revealed who TM3's investors were. 

Therefore, the court dismissed the case based on the forum selection clause. 

July 25, 2017 in Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)

Friday, July 21, 2017

Scholarship Spotlight: Crypto Transaction Dispute Resolution (Kaal & Calcaterra)

 

Crypto Transaction Dispute Resolution

Wulf A. Kaal (University of St. Thomas, Minnesota - School of Law)

Craig Calcaterra (Department of Mathematics, Metropolitan State University)

Abstract

Blockchain-ImageThe rapid evolution of anonymous, autonomous, and distributed blockchain-based smart contracting creates friction and enforceability issues with existing legal and jurisdictional principles, calling the future governance of blockchain technology into question. The effective governance of blockchain technology and smart contracting is essential to ensuring its continuing evolution. Based on the mathematical principles underlying the disposition of blockchains, we propose and evaluate an alternative approach to the existing legal exercise of jurisdiction that is inherent in blockchain technology itself. We call this distributed jurisdiction.

This contribution is not merely theoretical. Several Ethereum smart contracting crypto startups demonstrate that anonymity can be perpetuated in blockchain technology, despite blockchains’ eternal storage of information and its growing size working against anonymity. Startup applications highlight that the technology itself offers means of internal controls that help ensure effective governance in the continuing evolution of the technology.

Based on the concept of distributed jurisdiction, we suggest an open source platform ecosystem for smart contracting dispute resolution that allows users to opt into a conflict resolution mechanism that enables more nuanced crypto solutions and produces greater certainty in the process. Anonymized arbiter expertise via rankings in combination with a representation option for crypto disputes provide a resolution mechanism for legacy businesses that desire to participate in the growth of crypto business opportunities, hope to avoid legacy system intermediation and the associated transaction costs, but require legal legacy system assurances and crypto dispute resolution equivalence.

July 21, 2017 in Recent Scholarship | Permalink | Comments (0)

Thursday, July 20, 2017

Contracts and Commercial Law Scholarship: Weekly Top Ten SSRN Downloads (July 20, 2017)

Top-10-thumbsup

Top Downloads For: SSRN Logo2

Contracts & Commercial Law eJournal

Recent Top Papers (60 days)

As of: 21 May 2017 - 20 Jul 2017

Rank Paper Downloads
1.

Crypto Transaction Dispute Resolution

University of St. Thomas, Minnesota - School of Law and Department of Mathematics, Metropolitan State University
142
2.

A New Dawn for the Law of Illegality

University of Oxford - Faculty of Law
133
3.

Determining the Territorial Scope of State Law in Interstate and International Conflicts: Comments on the Draft Restatement (Third) and on the Role of Party Autonomy

Indiana University Bloomington Maurer School of Law
117
4.

The Design of Staged Contracting

University of Virginia School of Law and Stanford Law School
105
5.

Paternalism and Contract Law

University of Hull
102
6.

The Failures of State Insurance Regulation

University of Minnesota Law School
77
7.

Over-Reliance Under Contractual Disgorgement

Hebrew University of Jerusalem - Faculty of Law and Hebrew University of Jerusalem
76
8.

Postscript to Just Relationships: Reply to Gardner, West, and Zipursky

Tel Aviv University - Buchmann Faculty of Law and Tel Aviv University - Buchmann Faculty of Law
73
9.

Justice, Fault, and Efficiency in Contract Law

University of Florida - Levin College of Law
71
10.

Springwell-watch: New Insights into the Nature of Contractual Estoppel

London School of Economics - Law Department
66

 

Top Downloads For: SSRN Logo2

Law & Society: Private Law - Contracts eJournal

Recent Top Papers (60 days)

As of: 21 May 2017 - 20 Jul 2017

Rank Paper Downloads
1.

Crypto Transaction Dispute Resolution

University of St. Thomas, Minnesota - School of Law and Department of Mathematics, Metropolitan State University
142
2.

Determining the Territorial Scope of State Law in Interstate and International Conflicts: Comments on the Draft Restatement (Third) and on the Role of Party Autonomy

Indiana University Bloomington Maurer School of Law
117
3.

The Design of Staged Contracting

University of Virginia School of Law and Stanford Law School
105
4.

Paternalism and Contract Law

University of Hull
102
5.

Property and Sovereignty Imbricated: Why Religion Is Not an Excuse to Discriminate in Public Accommodations

Harvard Law School
89
6.

Politicized Dispute Settlement in the Pre-Investment Treaty Era: A Micro-Historical Approach

University of Wisconsin Law School
82
7.

Over-Reliance Under Contractual Disgorgement

Hebrew University of Jerusalem - Faculty of Law and Hebrew University of Jerusalem
76
8.

Disclosure Rules in Contract Law

Harvard Law School and Tel Aviv University
65
9.

Costs Allocation Under the Amended Indian Arbitration Law: A Critique

Independent
56
10.

Springwell-watch: New Insights into the Nature of Contractual Estoppel

London School of Economics - Law Department
66

July 20, 2017 | Permalink | Comments (0)

Wednesday, July 19, 2017

Elvis Guitar Contract Case on Appeal to Eighth Circuit

Half a year ago, I blogged here about dispute about a contract for a guitar used by Elvis Presley during his final 1977 tour. The guitar is currently on display at the National Music Museum (“NMM”), which is affiliated with the University of South Dakota. The museum claims ownership to the guitar as the museum bought it under a valid contract with a Mr. Johnson. Mr. Johnson’s former friend and business partner, Mr. Moss of Tennessee, claims that he is the rightful contractual owner of the contract although he, Moss, never paid for or even possessed the $250,000 guitar. A trial court judge in South Dakota ruled that “[u]nder Tennessee and South Dakota law, title to goods does not pass until delivery is made. Here, Johnson never delivered the Martin D-35 guitar to Moss. Because Johnson never delivered the guitar to Moss, Moss never acquired title to the Martin D-35. The court finds NMM is the owner of the Martin D-35.”

In a somewhat erroneous reporting of the case, the USA Today reports that Mr. Moss has now appealed the case to the Eighth Circuit Court of Appeals. Stay, uhm, tuned for more news on this case.

July 19, 2017 | Permalink

Tuesday, July 18, 2017

When “The Check Is In The Mail” Extinguishes A Debtor’s Obligation

At ContractsProf Blog, we love it when our readers send us new material or highlight interesting cases. This post below provides an interesting tale of course of performance with a sprinkling of negotiable instruments law. It comes to us courtesy of Keith Paul Bishop, partner with the California corporate and securities law firm of Allen Matkins. You can find Keith's original post on his firm's blog here.

      - MEB

---------------

CheckInTheMailMost creditors likely assume that they have not been paid unless and until they receive checks from their debtors.  In many cases that assumption may be correct, but in some cases it won’t be.  Section 1476 of the California Civil Code provides:

If a creditor, or any one of the two or more joint creditors, at any time directs the debtor to perform his obligation in a particular manner, the obligation is extinguished by performance in that manner, even though the creditor does not receive the benefit of such performance.

The application of this statute is illustrated by a case, Sleep EZ v. Mateo, Cal. Ct. Appeal Case No. BV 031618 (July 4, 2017).  The contract at issue in the case was an apartment lease.  The lessor’s manager had instructed the tenant to pay the rent by mail to a post office box and to always pay by money order.  The tenant had done so for 30 years until one day the lessor didn’t receive the rent.  The trial court gave judgment for the defendant finding that the tenant had purchased a money order for the full amount of the rent due and the lease required that rent be paid “to landlord by U.S. Mail”.  The Court of Appeal affirmed, citing Section 1476.  In doing so, the Court rejected the landlord’s argument that under Section 3310 of the California Uniform Commercial Code a money order remains unnegotiated until it is honored.

Several facts may distinguish this case from other cases in which a debtor defends on the basis that the check was mailed.  First, the record established that the creditor had required rent to be paid only by mail and prohibited payment in person.  Second, the record established that the tenant had performed in this manner for several decades.  Third, the tenant was able to introduce evidence that she had performed as directed by the landlord (i.e., the receipt for the money order).

July 18, 2017 in Recent Cases | Permalink | Comments (0)

Monday, July 17, 2017

Conditions Precedent, Specific Performance, and Unclean Hands, All in One Case!

A recent case out of Texas, Carnegie Homes & Construction, LLC v. Sahin, No. 01-16-00733-CV, brings up no fewer than three golden discussion topics of contracts law courses: conditions precedent, specific performance, and unclean hands. 

The dispute is actually a pretty run-of-the-mill disagreement over a real estate purchase. It just happens to contain a lot of arguments. 

First, Carnegie Homes, the buyer, attempted to argue that a number of conditions precedent had never been fulfilled, and therefore none of its obligations to buy the property had been triggered. The contract in question did read it "shall only be effective upon performance of the conditions set forth in Section E of this agreement." But despite calling the contents of Section E "conditions," the court read them and found them to be covenants, not conditions, dictating when and how much Carnegie Homes would pay and how much their respective obligations would be. Rather than conditions, Section E contained mutual promises, and indeed, Section E was called "Terms" instead of conditions. Therefore, the reference to conditions was a mistaken one. 

Second, specific performance was deemed to be the proper remedy, because the contract was for the sale of a unique property. Carnegie Homes tried to argue that specific performance was not usually made available to the seller of a piece of property, only to the buyer of that property. However, the court said that specific performance was not so limited and that sellers have the right to seek and be rewarded specific performance just as much as buyers. 

Finally, Carnegie Homes tried to argue that unclean hands prevented the seller, Sahin, from receiving relief. The conduct Carnegie Homes complained of concerned Sahin's service of a supplemental petition that alleged Carnegie Homes committed fraud. Sahin served the petition but never filed it. Carnegie Homes, however, was required to disclose it in a loan application, which allegedly caused it to be refused financing, leading to Carnegie Homes's difficulty in fulfilling its obligation to buy the property. The court, however, found that the disclosure to one lender did not block Carnegie Homes from performing the rest of its obligations, and did not act as unclean hands on Sahin's part. The contract did not require Sahin to help Carnegie Homes obtain financing, nor did it condition Carnegie Homes's obligation to pay on the receipt of financing. Therefore, Carnegie Homes was not excused from its obligations and Sahin was entitled to relief. 

July 17, 2017 in Recent Cases, Teaching, True Contracts | Permalink | Comments (0)

Friday, July 14, 2017

Contracts and Commercial Law Scholarship: Weekly Top Ten SSRN Downloads (July 14, 2017)

This week's list is a day late, but hopefully not a dollar short. Enjoy!

Top-10-3D

Top Downloads For: SSRN Logo2

Contracts & Commercial Law eJournal

Recent Top Papers (60 days)

As of: 15 May 2017 - 14 Jul 2017

Rank Paper Downloads
1.

A New Dawn for the Law of Illegality

University of Oxford - Faculty of Law
129
2.

Making Finance More Competitive

Boston University School of Law
122
3.

Determining the Territorial Scope of State Law in Interstate and International Conflicts: Comments on the Draft Restatement (Third) and on the Role of Party Autonomy

Indiana University Bloomington Maurer School of Law
117
4.

Crypto Transaction Dispute Resolution

University of St. Thomas, Minnesota - School of Law and Department of Mathematics, Metropolitan State University
106
5.

Paternalism and Contract Law

University of Hull
98
6.

The Design of Staged Contracting

University of Virginia School of Law and Stanford Law School
97
7.

The Failures of State Insurance Regulation

University of Minnesota Law School
75
8.

Justice, Fault, and Efficiency in Contract Law

University of Florida - Levin College of Law
65
9.

Postscript to Just Relationships: Reply to Gardner, West, and Zipursky

Tel Aviv University - Buchmann Faculty of Law and Tel Aviv University - Buchmann Faculty of Law
67
10.

Over-Reliance Under Contractual Disgorgement

Hebrew University of Jerusalem - Faculty of Law and Hebrew University of Jerusalem

 

Top Downloads For: SSRN Logo2

Law & Society: Private Law - Contracts eJournal

Recent Top Papers (60 days)

As of: 15 May 2017 - 14 Jul 2017

Rank Paper Downloads
1.

Determining the Territorial Scope of State Law in Interstate and International Conflicts: Comments on the Draft Restatement (Third) and on the Role of Party Autonomy

Indiana University Bloomington Maurer School of Law
117
2.

Crypto Transaction Dispute Resolution

University of St. Thomas, Minnesota - School of Law and Department of Mathematics, Metropolitan State University
107
3.

Paternalism and Contract Law

University of Hull
98
4.

The Design of Staged Contracting

University of Virginia School of Law and Stanford Law School
97
5.

Politicized Dispute Settlement in the Pre-Investment Treaty Era: A Micro-Historical Approach

University of Wisconsin Law School
79
6.

Property and Sovereignty Imbricated: Why Religion Is Not an Excuse to Discriminate in Public Accommodations

Harvard Law School
73
7.

Customary Principles Regarding Public Contracts Concluded with Foreigners

Sciences Po Law School (Ecole de Droit de Sciences Po)
72
8.

Disclosure Rules in Contract Law

Harvard Law School and Tel Aviv University
62
9.

Springwell-watch: New Insights into the Nature of Contractual Estoppel

London School of Economics - Law Department
61
10.

Over-Reliance Under Contractual Disgorgement

Hebrew University of Jerusalem - Faculty of Law and Hebrew University of Jerusalem
72

July 14, 2017 in Recent Scholarship | Permalink | Comments (0)

Wednesday, July 12, 2017

What Does "Renovate" Mean to You? (A Perfect Question for Those, Like Me, Addicted to HGTV)

I'm blogging this case because I had a whole conversation with non-lawyer friends about what the term "renovate" means, and I think maybe they changed my mind about what "renovate" means. I don't know. Upon first reading this case, I spent a lot of time reflecting on all the episode of "House Hunters Renovations" I've watched and what actually happens in them. 

Anyway, if you want to go away and watch a marathon of "House Hunters Renovation" at this point, it's okay. I understand. This blog post will still be here for you to contemplate afterward. 

The case in question (there is an actual case) is a recent case out of Pennsylvania, Blackburn v. King Investment Group, No. 2409 EDA 2016, and, as you may have guessed, the debate in the case was over the meaning of the word "renovate" in the contract. One party maintained that the term was ambiguous, because it could have required them to demolish the bathrooms at issue or merely to do what was necessary to bring them up to modern standards (which was less than full demolition). The other party argued that it was not an ambiguous term and clearly required demolition. 

The court agreed that it was a clear and unambiguous term that required demolition and replacement, and this was what got me to thinking: Do I think that renovation requires demolition? At first my kneejerk reaction was like, "I don't know, I don't think it does." But after conversations with people, I decided maybe it does mean demolition? That doing something less than demolition wouldn't be called renovation but just updating? If you say you're going to renovate your kitchen, does that always imply that you're demolishing the entire kitchen? If you do less than that, is saying you renovated your kitchen misleading? 

My struggling with the word leads me to believe maybe it's not clear and unambiguous but I often feel that way with these types of cases. What I find extra-striking about this case is that, while the court proclaimed the term "clear and unambiguous," it did so by relying entirely on parol evidence, and this parol evidence, in my view, just determined what the parties understood "renovation" to mean. I think finding what renovation meant in the context of this contract to these parties makes a lot more sense than declaring it to be a clear and unambiguous term generally. 

July 12, 2017 in Commentary, Recent Cases, True Contracts | Permalink | Comments (0)

Tuesday, July 11, 2017

Law Firm Associate Makes $1.5 Billion Mistake

Will an associate who makes a $1.5 billion (yes, with a “b”) clerical error still make partner?... Do law firms owe a duty of care to clients of opposing party’s law firm? The answers, as you can guess: very likely not and no! The case goes like this:

General Motors (“GM”), represented by law firm Mayer Brown, takes out a 2001 loan for $300 million and a 2006 loan for $1.5 billion secured by different real estate properties. JP Morgan acts as agent for the two different groups of lenders. GM pays off the first loan, but encounters severe financial troubles and enters into bankruptcy proceedings before paying off the big 2006 loan. GM continues to follow the terms on that loan, and the bankruptcy court also treats the lenders as if they were still secured.

What’s the problem with this, you ask? When Mayer Brown prepared and filed the UCC-3 termination statement for the 2001 loan, the firm also released the 2006 loan by mistake. The lenders of that were thus not secured under the law any longer even though both GM itself and the bankruptcy court treated them as such. The big loan was simply been converted from a secured transaction into a lending contract. Yikes.

How did this happen? The following is too good to be true, if you are in an irritable or easily amused summer mode, so I cite from the case:

“The plaintiffs' complaint offers the following autopsy of the error[]: a senior Mayer Brown partner was responsible for supervising the work on the closing. He instructed an associate to prepare the closing checklist. The associate, in turn, relied on a paralegal to identify the relevant UCC-1 financing statements. As a cost-saving measure, the paralegal used an old UCC search on General Motors and included the 2006 Term Loan. Another paralegal tasked with preparing the termination statements recognized that the 2006 Term Loan had been included by mistake and informed the associate of the problem, but he ignored the discrepancy. The erroneous checklist and documents were then sent to [JP Morgan’s law firm] Simpson Thacher for review. The supervising partner at Mayer Brown never caught the error, nor did anyone else. With JP Morgan's authorization, the 2001 Synthetic Lease payoff closed on October 30, 2008 … We must also note that, when provided an opportunity to review the Mayer Brown drafts, a Simpson Thacher attorney replied, ‘Nice job on the documents.’”

The lenders represented by JP Morgan sued not Simpson Thacher or JP Morgan, but… Mayer Brown; counsel for the opposing party, arguing that the law firm owed a duty to them not because Mayer Brown represented them or their agent, JP Morgan, in connection with these loans, but rather because, plaintiffs argued, Mayer Brown owed JP Morgan – not the plaintiffs directly – a duty of care as a client in other unrelated matters! As the court said, an astonishing claim.

A law firm or a party directly must always prepare a first draft of any document. “By preparing a first draft, an attorney does not undertake a professional duty to all other parties in the deal.” In sum, said the court, “there is no exception to the Pelham primary purpose rule, and there is no plausible allegation that Mayer Brown voluntarily assumed a duty to plaintiffs by providing drafts to Simpson Thacher for review.”

The case is Oakland Police & Fire Ret. Sys. v. Mayer Brown, LLP, States District Court for the Northern District of Illinois, Eastern Division, Case No. 15 C 6742

July 11, 2017 in Current Affairs, Famous Cases, In the News, Miscellaneous, Recent Cases, True Contracts | Permalink | Comments (0)